#SpotVSTFuturesStrategy

In the financial context, spot and futures operations are two distinct ways of trading assets. Spot trading involves the buying and selling of assets for immediate delivery, while futures are contracts to buy or sell an asset at a future date for a predetermined price.

Spot Trading:

Immediate Delivery:

The transaction is carried out and settled at the moment, with the physical or digital delivery of the asset almost immediately.

Spot Price:

It refers to the current market price for immediate delivery.

No Leverage:

Generally, leverage is not used in spot trading, which means the total amount of the asset's value is invested.

Example:

Buy 1 Bitcoin today at its current price and receive it in your digital wallet shortly after.

Futures Trading:

Futures Contract: Involves an agreement to buy or sell an asset at a future date.

Futures Price: It is the agreed price for the future transaction.

Leverage: Futures contracts often use leverage, allowing traders to control a larger position with a smaller initial investment (margin).

Liquidation Risk: If the price of the asset moves against the trader's position, there is a risk that the contract will be liquidated (forced closure) if the margin falls below a certain level.

Example: A oil producer might use futures contracts to lock in a price for their oil in the future, protecting themselves against potential price drops.